The State Children's Health Insurance Program: High Stakes forAmerican Families

Congress is at a crossroads in the debate over the State
Children's Health Insurance Program (SCHIP). One road gives
government more control over the health care of American families.
The other strengthens private sector options and increases parental
choice and responsibility.

Congress is now reviewing and debating changes to the program.
Over the past 10 years, the program has increased dependence on
government, undermined parental responsibility, and increased the
burden on taxpayers. With SCHIP requiring reauthorization in 2007,
some Members of Congress are seeking to accelerate these trends.
Members must recognize that SCHIP, as it is structured today, is
not serving the bests interests of children, their families, or
taxpayers.

The Beginning of SCHIP

In the early 1990s, when President and First Lady (now Senator)
Clinton proposed a form of national health insurance, Americans
wisely rejected the idea that the government should control the
financing and delivery of medical care. Recovering from this
temporary setback, many advocates of government-controlled health
insurance thought it best to pursue an incremental strategy of
progressively expanding the government's share of health insurance
coverage. They enthusiastically supported the enactment of SCHIP as
a key component of the Balanced Budget Act of 1997.

SCHIP was originally designed to offer coverage for uninsured
children in low-income families that earn no more than twice the
federal poverty level (FPL). The program provided federal matching
funds as block grants to states, with total federal expenditures
capped at $40 billion over 10 years.

Increasing Dependency on
Government

The dynamics of the program set in motion an expansion that has
continued for the past 10 years. In 1998, 28 percent of American
children were enrolled in either Medicaid or SCHIP.[1] The percentage of
all children in SCHIP jumped to 45 percent (or 6.2 million
children) by 2005.[2] The program is encompassing persons who are
not poor, and in certain cases, are grown adults.

State policies have encouraged the trend of adult enrollees.
Almost 10 percent of SCHIP enrollees are adults, according to the
Government Accounting Office.[3] In Minnesota, for example, 87
percent of those enrolled in 2005 were adults, as were 66 percent
of those enrolled in Wisconsin.[4]

Nor are the state officials sticking to the original eligibility
ceiling of 200 percent of the FPL. New Jersey's SCHIP program
covers children whose parents earn up to 350 percent of the FPL--an
amount more than $72,000 per year.[5] The original framers did not
intend the legislation to cover middle-class families. It is
increasingly clear that many Members of Congress want expansion
into higher income families largely because they favor government
health insurance over private health insurance as a matter of
policy.

Transferring Family Responsibilities
to the Government

In many ways, SCHIP has eroded a responsibility traditionally
reserved to parents.

Division of Families and Loss of Private Coverage. In
many cases, SCHIP gives children health coverage totally separate
from their parents' health coverage. In practice, that translates
to different office locations, different office hours, different
doctors, different paperwork--all of which make life more
difficult, especially for lower-income families who are likely to
have scheduling and transportation problems. The goal should be to
help unite families' coverage under one private plan, not spread
their coverage throughout a hodgepodge that increases dependency on
the government.

While some Members of Congress suggest that private coverage is
unattainable for lower-income, working families, the facts tell a
very different story. According to the Congressional Budget Office
(CBO), 50 percent of children whose families earn between 100
percent and 200 percent of the FPL have private health coverage.
That number skyrockets to 77 percent for children whose families
earn between 200 percent and 300 percent of the FPL.[6] In
addition, many of the working poor have private health insurance
available to them through their workplace. In fact, 60 percent of
people covered by SCHIP expansions already had private coverage
available to them.[7] Based on the most recent research, any
expansion of program coverage into middle- and upper middle-class
families could accelerate the displacement of private coverage.[8]

The data also suggest that the very availability of SCHIP to
low-income workers may cause them to decline private insurance for
both themselves and their children.[9] In other words, once their
children become eligible for SCHIP, working parents may decide to
abandon their own health insurance. In the event of catastrophic
illness, those adults would be dependent on taxpayers to pick up
the bill (either directly or indirectly) or be forced into a
crushing debt.

The Nature of Medical Services. As with most government
health programs, the benefits and services provided through SCHIP
are determined by politicians and bureaucrats. Americans want to
reduce or eliminate the number of uninsured persons, but they are
also wary of greater government involvement in health care.
Sixty-two percent of Americans believe that if government takes
over more of the health care system, the government will get in the
way of the doctor-patient relationship.[10] Fifty-eight percent of
Americans believe that if government takes over health care, the
individual's choices of doctor, treatment options, hospitals, and
access to care will be rationed.[11] Based on the experience of
government-run health care in countries like Britain and Canada,
these beliefs are well grounded.[12]

As a matter of policy, parental choice should be primary.
Parents are the moral as well as the legal guardians of their
children and have ultimate responsibility for their children's
well-being. Yet, if children are enrolled in a government health
program, the parents' options are set by government officials;
these determinations are sometimes made on the basis of ideological
or political calculations, not simply medical circumstances.
Parents may not be fully aware of the medical services that
government officials authorize for their children, and they may
even be confused as to what is or is not provided under the
government's health care program.

For parents, the crucial issues often revolve around matters
relating to sexual behavior and health, which clearly have a moral
or ethical dimension. In the case of SCHIP, for example, the
enabling legislation stipulates that the federal government shall
not pay for abortions using program dollars except in the case of
rape, incest, or endangerment of the mother. But for many parents,
abortion is not the only issue that merits parental involvement and
consent. State officials in Michigan, concerned that the law
required SCHIP to fund contraception and sterilization services,[13]
amended Michigan's Title XXI State Plan to remove coverage for
those services.[14]

In this area of public policy, both clarity of coverage and
parental freedom are crucial. Clearly, parents have the right to
know what services their children are receiving, and they have a
right to withhold consent from such services if they deem them
ethically or morally objectionable. Taxpayers also have the right,
through their elected representatives, to withhold their tax
dollars from funding such procedures. For example, some forms of
emergency contraception are, in fact, abortifacients.[15]
Many taxpayers and parents might find this procedure objectionable.
Furthermore, if parents are to be liable for subsequent medical
costs for their children's iatrogenic illnesses, they have a right
to know and approve the medical services their children are
getting.

Burdening the Taxpayers

SCHIP was intended to help children whose families make too much
income to qualify for Medicaid, a traditional welfare program, but
not enough to afford private coverage. Since its inception,
however, the program has expanded government control over a
progressively larger share of the health insurance system.

Current reauthorization proposals in Congress are designed to
exacerbate this trend. The Children's Health First Act
(Dingell/Clinton, H.R. 1535 and S. 895) would expand SCHIP income
eligibility to 400 percent of the FPL, or $82,600 for a family of
four. If it becomes law, more than 71 percent of children will be
eligible for either SCHIP or Medicaid.[16] Whereas SCHIP was
originally a fixed appropriation of $40 billion over 10 years, the
estimated cost of current proposals exceeds $50 billion over 5
years.[17]

SCHIP contains perverse incentives for states to expand the
program beyond its original mandate. States that overspend
typically get bailed out by either collecting SCHIP money that was
not spent by other states or by receiving federal funds above and
beyond the original allotments. States like Maryland,
Massachusetts, and New Jersey are repeat "shortfall" states and
have set SCHIP income eligibility at or above 300 percent of the
FPL. These states are turning middle-class families into welfare
recipients at the expense of families in other states and
taxpayers.

SCHIP's expansion up the income scale has initiated a major
change in the way that many Americans--working adults and children
from non-poor families--obtain health insurance. The debate over
SCHIP is not simply about the future of one program; it is part of
the larger national debate over whether or not the United States
will have a health care system controlled by government,
accompanied by a dramatic increase in taxes for ordinary
Americans.

What Congress Should Do

In designing a new SCHIP policy, Congress should incorporate
measures that would lessen dependence on government officials in
the financing and delivery of health care for children, respect and
enhance the role of parents, and reverse the "mission creep" toward
national health insurance. Such an entitlement would inevitably be
characterized by central planning, price controls, rationing, and
the suppression of personal freedom.

Target SCHIP on lower-income, uninsured children. SCHIP
should not be used as the foundation for incremental government
health care; it should remain limited in focus and funding to
addressing the needs of children who are below 200 percent of the
FPL and who do not have access to private health insurance.

Empower families to make the health care decisions affecting
their children. Parents, not the government, should decide what
is best for their children. A robust system of premium assistance
would allow parents to use SCHIP funds to purchase private health
care coverage without government micro-management. Most
importantly, SCHIP must respect the moral authority of parents,
especially when it comes to the provision of controversial health
care services. Congress and state policymakers should soundly
protect parents' rights, including the rights to know what services
are being provided to their children and to consent before those
services are rendered.

Expand options for individuals and families beyond the
narrow confines of the SCHIP program. The number of uninsured
children is just one aspect of the broader malfunctioning of the
health care system and the government policies that shape it. The
best way to address the needs of children is to address the
fundamental problems of the health insurance markets, such as
outdated state insurance regulations and the inequitable tax
treatment of health insurance. Congress should use the opportunity
of SCHIP's reauthorization to tackle the larger problems of the
health care system. A powerful injection of consumer choice and
robust competition would help make private health insurance more
accessible and affordable for all Americans.

Conclusion

Most American taxpayers are willing to provide health insurance
for children who do not have it. But in drafting the SCHIP
reauthorization, Congress should make it easier, not harder, for
individual families to secure the health care they want. The goal
should be to unify families through family coverage, whether that
coverage is provided through employers or in other ways of the
family's choosing.

Government funding for children's health insurance should
simplify, rather than complicate, the lives of poor working
families; it must build upon, rather than weaken, private health
insurance; finally, it must support, rather than undermine, the
transmission of fundamental ethical and moral values from parents
to children, which is at the heart of family life.

Connie Marshner is a Visiting
Fellow for Domestic Policy Studies at The Heritage Foundation.
Nina
Owcharenko is Senior Policy Analyst in the Center for Health
Policy Studies at The Heritage Foundation.

[15]As Dr. James Trussel, Director of the Office
of Population Research at Princeton University, explains, "To make
an informed choice, women must know that ECPs--like all regular
hormonal contraceptives such as the birth control pill, the implant
Implanon, the vaginal ring NuvaRing, the Evra patch, and the
injectable Depo-Provera,31 ...may prevent pregnancy by delaying or
inhibiting ovulation, inhibiting fertilization, or inhibiting
implantation of a fertilized egg in the endometrium." See
ec.princeton.edu/MOA.pdf, accessed on June 19,
2007.

[17]Edwin Park and Robert Greenstein, "Options
Exist for Offsetting the Cost of Extending Health Care Coverage to
More Low-Income Children," Center on Budget and Policy Priorities,
April 12, 2007, at www.cbpp.org/3-8-07health.htm.

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